There have been many affordable housing projects in the Honolulu area but affordable housing is still in high demand. With each new affordable project there are hundreds, if not thousands of buyers waiting to apply. The Ala Moana & Kakaako neighborhoods will see several new projects developed over the next few years with some sort of affordable housing piece, either through rentals or units for sale.
The affordable housing program is not the same as the reserved housing program which you will see in the Kakaako and Ward Village Areas. The reserved housing program is overseen by the HCDA (Hawaii Community Development Authority) which is another government agency that oversees all development in the Kakaako neighborhood. Both programs share similar eligibility guidelines but the programs are very different.
Below are some FAQ’s and information related to affordable housing:
What is HHFDC?
The HHFDC or Hawaii Housing Finance and Development Corporation is the state agency that oversees all of the affordable housing in Hawaii. They also oversee the financing and development of the actual affordable housing units as well.
What are the benefits of HHFDC's Affordable Housing Program?
• The program allows eligible and qualified applicants to purchase units at below market pricing
• The program also offers the opportunity to own and live in a new construction project in town
What are the income limits for Affordable Housing?
Affordable housing will have some sort of income requirement. Every project is different and the income requirement is based on household size and income. Some projects require a minimum of 80% of the AMI (Area Median Income) and most projects have a maximum of 140% of the AMI. Please see the table below for the 2019 Honolulu AMI figures.
Are you eligible for Affordable Housing?
Every affordable project will have different requirements. Some will be set forth by the HHFDC and others will be put in place by the developer.
In the end it is up to the HHFDC to determine a buyer’s eligibility. Some of the basic requirements are:
1. U.S. citizen or permanent resident alien with a valid government issued ID.
2. At least 18 yeas old.
3. Resident of the State of Hawaii and currently residing in the State of Hawaii.
4. Shall physically occupy the unit.
5. Does not own a majority interest in a fee simple or leasehold property anywhere in the world.
6. Has sufficient gross income to qualify for a loan to finance the purchase of a unit.
As stated above the guidelines from project to project may be different, which is why buyers should work with an agent who can understand the differences. Most recently The Central Ala Moana’s affordable housing program required a minimum income of 80% AMI, when the developer’s first project Kapiolani Residence did not have a minimum AMI requirement.
Is there a deposit required?
Some affordable projects require a 10%, while others only require 5%. Please keep in mind this is only what the developer requires, your loan officer may require a larger down payment in order to qualify you for your loan. Most projects will split the deposits up, typically one deposit due at the signing of the contract and another deposit required after a 30 day recession period to review the project documents.
What are the restrictions on the unit?
Typically there are two programs imposed on all new HHFDC Affordable Units, which are a Buyback period & SAE (Shared Appreciation Equity).
What is the buyback?
The buyback program requires the owner to occupy the unit as their primary residence typically for 10 years or the duration of the program (every project is subject to a different length). The buyback program allows the HHFDC the first right to purchase the unit back in the event the owner can no longer occupy the unit or chooses to sell or transfer unit in the first 10 years of ownership. At the end of the 10 year period, the buyback program no longer applies.
If an owner needs to sell within the first 10 years they must notify the HHFDC and they have the first right to buy your unit back from you at a price determined by the affordable housing guidelines. If the HHFDC does not buyback your unit then they will allow you to sell but also determine the price using the affordable housing guidelines and taking to account the costs to sell.
What is the SAE?
The SAE or Shared Appreciation Equity is designed to help fund future HHFDC affordable housing projects. The affordable housing program gives buyers the opportunity to purchase a unit at below market prices. To help the program grow and to ensure affordable housing projects in the future a percentage of your profit will be returned back to the state when you sell.
How is the SAE amount calculated?
Every project is different. Typically the shared appreciation is a calculation based on the purchase price and fair market value of the property. Before contracting buyers should be provided an example of how the SAE is calculated, when it can be paid off, and other information regarding the SAE program for that building.
Other affordable units such as at Ho’opili in Ewa Beach do not have Shared Appreciation Equity.
What is the next step?
Please feel free to contact me and I’d be happy to help walk you through the process. The next projects with affordable housing will be SKY Ala Moana and Ililani in Kakaako. There are other affordable housing units which will be ongoing developments such as Ho’opili and Koa Ridge.
The first step is to get in touch with a real estate agent that can show you your options as well as get you in touch with a lender familiar with affordable housing projects (most projects have approved/preferred lenders).
* I do not represent the developer of any new affordable projects nor am I part of any sales teams. I make no representations on their behalf. If you want information directly from a sales office I urge you to contact them directly. If you would like me to help represent you as your real estate professional I would be happy to meet with you.
Joe is realtor with Better Homes and Gardens Real Estate Advantage Realty. He majored in finance and has experience as a former mortgage loan originator. He has helped buyers both with new project loans and going through the process of applying and obtaining units in new projects. He uses his finance, mortgage, and real estate knowledge to help home buyers find the right properties to fit their needs. Contact Joe by phone or email at (808) 351-8394 or JoeC@BetterHawaii.com